Private banking grows in leaps and bounds

By Riyadi

JAKARTA (JP): Private banking, offering convenience and secrecy to the elite, is becoming increasingly popular in Indonesia.

But not everybody can access private banking services.

American Express Bank here requires customer deposits of at least US$1 million. And Bank Niaga opens its private banking division to clients with minimum account balances of Rp 2 billion (US$846,000).

There are similar services for smaller accounts. Bank Bali's preferred banking services require minimum deposits of Rp 250 million. Bank Ciputra has a similar service requiring minimum deposits of Rp 100 million.

Those qualifying for private banking services are treated like royalty. They are addressed by their names from the moment the doormen greet them at the banks' head offices.

"We treat them individually and differently. We provide them special rooms to ensure their privacy... Privacy is a key point in private banking," said Brata S. Winata, the head of the Preferred Banking Division at Bank Bali.

Like Bank Bali's preferred banking, private banking takes on different names at different banks. Hence, City Gold Priority banking at Citibank, Priority Banking at Standard Chartered Bank and Preferred Circle at Bank Niaga.

Private banking looks after the financial affairs of individuals. Private banking services range from clients' billing to advanced management of their funds.

"Once a client steps in our private banking room, we are ready to serve him from A to Z," said a preferred circle executive at Bank Niaga.

Ultimately, discretion is what private banking is all about. Private banks have the cachet of ultimate discretion. Naturally, all top-end banks maintain confidentiality, but private banking is even more discreet.

"Very often a private banking client asks me to accompany him to dine out or go out of town. And of course, we are happy to do it as we basically serve 24 hours a day, seven days a week," said a relationship manager at Bank Ciputra's private banking division.

But she said that all services must remain in the realm of her bank's banking activities.

Private banking is more expensive. All private banking executives contacted by the Post confirmed this, but they refused to mention the rates they charged for services. But these extra costs mean little to those valuing privacy and convenience.

Private banking is good for banks because they get fee-based income which does not place heavy demands on their balance sheets. It also provides cross-marketing opportunities with their other divisions.

Secrecy

If money is no object and secrecy is paramount, then billionaires anxious to keep their affairs private would turn automatically to Switzerland because Swiss banks are even more discreet.

Indonesia's central bank can ultimately demand information from any domestic bank at the end of a business day or at least the end of a month. But once your money is locked away in Switzerland, it is safe from prying eyes.

But not everybody wants to invest in far away Switzerland, considering that several foreign banks operating in Indonesia already offer private banking services, which ultimately guarantee privacy and offer better returns.

Most major foreign banks operating here offer private banking services. American Express Bank, for instance, wants its private banking business to become a major profit earner outside its commercial banking division.

"Look at the expansion of the economy, look at the expansion of the middle class. The opportunity to grow more in private banking is there," said Douglas H. Short II, the senior director and country head of American Express Bank here.

While foreign banks here are old hands at private banking, local banks are just starting to realize its potential.

Most local private banking services began less than four years ago. Some domestic banks have not even focused on these services, said Brata of Bank Bali.

He contended that the late awakening of local private banking resulted from the strong presence of foreign banks' private banking services here.

"Some foreign banks without branches here regularly send their private banking relations managers to Jakarta just to cater to the needs of their existing clients here and prospective clients," Brata said.

But he said several local banks had started to realize the potential of private banking, given the rapid growth of the economy and the middle class.

Because private banking is discreet, there is no public data available on it locally.

Brata said the liquid assets managed by local private banking services were growing about 15 percent yearly.

Richard Holmes, the managing director of American Express Bank, said the assets managed by the global private banking industry were worth US$14 billion and were growing 15 percent each year.

"That's the world's growth. Looking at the pace of Indonesia's economic growth, I believe that the growth of the private banking industry in Indonesia is much higher," Holmes said.

He said his bank continued to strengthen its private banking business in Indonesia by employing more relations managers. The bank wants to capture the richest locals as its clients.

The really crucial feature of private banking is one-stop shopping, whereby busy people no longer have to deal with five or six people.

"We have commercial banking and private banking... we can take care of total banking potentials. So, we provide services to individuals and also to their companies," Holmes said.

"The number of competitors is quite a lot, but the number of real competitors is very small. We feel very good to face competition," he added.

Holmes said it took at least four fundamentals to build strong private banking: capital, reputation, products and service.

Before private banking clients place money with a bank, they want to be absolutely certain the bank will be around the following year, which requires a strong capital base, he said.

"When they look at American Express Bank, they see the American Express Company and an $8.2 billion capital base. I think that's a fairly compelling advantage for us both with our existing clients and with our prospects," Holmes said.

And reputation is extremely important, he added.

"It is here that I think we do especially well. As I traveled to our 14 private bank offices and met with clients, I found the Amex brand to be extremely powerful in all of our markets," Holmes said.

A wide product range also counts, he said.

The American Express Bank has a superb set of products. Its world portfolio of mutual funds have produced solid performances in the last few years. The bank has a lot to offer in terms of discretionary asset management, fiduciary services, credit, treasury and capital protection services.

On fund management, the bank benefits from the investment management expertise of the American Express Financial Advisors company which owns or manages more than $138 billion in assets.

Amex also has strong card products such as the Platinum and Gold Cards, and a worldwide network of travel offices.

"The products are there. The challenge is to do a better job of packaging, integrating and marketing them to get at the untapped potential they represent," he said.

Holmes said he had established five product areas focused on investment, treasury, credit, charge cards and fiduciary services. Each of these areas had plans for product enhancement according to clients' needs.

"As our clients become more sophisticated, so will our product offerings," he said.

Lastly, but certainly not least, the bank claims to offer good service, boasting that its relationship managers were the single most important driver of client satisfaction.

"Clients tell us they like our relationship managers but need more of them," Holmes said. (rid)